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Jim Sinclair: QE to Infinity (The USD At .7000 USDX) or Infamy for Bernanke

While Obama is busy distancing himself from Bernanke and preparing to give the Fed Chairman the boot and bring in likely Yellen, Dudley, Summers, or Turbo Timmy, legendary gold trader Jim Sinclair states that it is QE to Infinity or Infamy for Bernanke.

Ahead of today’s much anticipated FOMC statement, with rumors of Fed “taper” swirling, is Bernanke and the Fed ready for what is sure to come should the market be convinced the Fed will actually taper down QE?

1. Interest rates are the price of federal paper in the federal paper bond market for all the various common periods of time.
2. Interest rates rise if the price of binds fall in the Federal bond market.
3. Interest rates fall if the price of Federal paper rises in the Federal bond market.

That is the total definition.

QE is the act of the Federal Reserve or any similar central banks making bids in the Federal bond market.

If the Fed wishes it can bid forever at any price to keep interest
rates low but the unintended consequence is pressure on the US dollar or
currency of the country doing QE.

QE is in fact debt monetization but central banks do not want to call
it that because the historical and traditional understanding of debt
monetization is and will in time be as follows:

MonetizationFrom Wikipedia, the free encyclopedia

Monetization is the process of converting or establishing
something into legal tender. It usually refers to the coining of
currency or the printing of banknotes by central banks. Things such as
gold, diamonds and emeralds generally do have intrinsic value based on
their rarity or quality and thus provide a premium not associated with
fiat currency unless that currency is “promissory”: That is the currency
promises to deliver a given amount of a recognized commodity of a
universally (globally) agreed to rarity and value, providing the
currency with the foundation of legitimacy or value. Though rarely the
case with paper currency, even intrinsically relatively worthless items
or commodities can be made into money, so long as they are difficult to
make or acquire. Monetization may also refer to exchanging securities
for currency, selling a possession, charging for something that used to
be free or making money on goods or services that were previously
unprofitable.

Monetizing debt

In many countries the government has assigned exclusive power to
issue or print its national currency to a central bank. The government
treasury must pay off government debt either with money it already holds
or by financing it by issuing new bonds which are sold to either the
public directly or the central bank, in order to raise the funds
required to repay bonds that have come due. The central bank may
purchase government bonds by conducting an open market purchase, i.e. by
increasing the monetary base through the money creation process. If
government bonds that have come due are held by the central bank, the
central bank will return any funds paid to it back to the treasury.
Thus, the treasury may ‘borrow’ money without needing to repay it. This
process of financing government spending is called ‘monetizing the
debt’.[1]

Central banks are usually forbidden by law from purchasing debt
directly from the government. For example, the Maastricht Treaty(article
104) expressly forbids EU central banks’ direct purchase of debt of EU
public bodies such as national governments. Their debt purchases have to
be from the secondary markets. Monetizing debt is thus a two-step
process where the government issues debt to finance its spending and the
central bank purchases the debt, holding it till it comes due, and
leaving the system with an increased supply of money.

Andy Haldane, a senior Bank of England, or BOE, official on
Wednesday, warned that the bond market was caught up in the biggest
bubble in history, posing a serious threat to the stability of the
global financial system.

Across the Atlantic, the United Kingdom also houses 22 of the
world’s fastest growing companies, and is next on IBT1000. Bolstered by
the world’s historically most valuable currency – the British Pound –
the UK has Europe’s third largest economy behind Germany and France. As
the cradle of the Industrial Revolution, the UK boasts large hydrocarbon
resources including coal and oil, and has a highly mechanized
agricultural base. The country, much like the United States has
developed a large service and financial sector, but does produce large
amounts of electric power equipment, motor vehicles, electronics and
communication equipment and petroleum. The global financial crisis of
2008 hit the island kingdom particularly hard as its financial
institutions are tied to global markets. Since then, the country’s
financial health has seesawed as European debt fears keep global stocks
on a volatile rollercoaster. The UK in recent years could also face an
increasing level of diplomatic isolation, however, as Germany and France
take the lead in reigning in the Euro zone’s debt problems.